Microsoft says Google running 'shadow campaigns' as Big Tech legal feud heats up

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A legal feud between two giants of the tech world deepened this week as Microsoft (MSFT) accused Google (GOOG, GOOGL) of running "shadow campaigns" to discredit Microsoft's cloud-computing business.

The claim was made in a Monday blog post from Microsoft deputy general counsel Rima Alaily, who said Google quietly orchestrated and funded these "shadow campaigns" to tarnish how global competition authorities, policymakers, and the public view Microsoft’s methods.

Google, Alaily said, has gone to "great lengths to obfuscate its involvement, funding, and control" of a new coalition of European cloud providers formed to attack how Microsoft monetizes and tries to protect its cloud infrastructure.

The group called the Open Cloud Coalition publicly launched on Tuesday, with Google and nine smaller cloud providers as members. The coalition's website states its members are "committed to creating a fair and open cloud ecosystem" and can benefit by "influencing policy."

A spokesperson for Google objected to the claim it operated in the shadows, instead saying the company had been "very public" about its concerns.

WASHINGTON, DC - OCTOBER 2: Microsoft CEO Satya Nadella arrives at federal court on October 2, 2023 in Washington, DC. Nadella is testifying in the antitrust trial to determine if Alphabet Inc.'s Google maintains a monopoly in the online search business, which is expected to last into November. (Photo by Drew Angerer/Getty Images)
Microsoft CEO Satya Nadella arrives at federal court last October to testify in Google's antitrust trial. (Photo by Drew Angerer/Getty Images) · Drew Angerer via Getty Images

At the heart of the disagreement with the two companies are Microsoft’s cloud licensing agreements.

Google has complained to the European Commission that these agreements are "anticompetitive," arguing that Microsoft illegally leveraged enterprise server software "Windows Server" licenses to force customers to stick with Microsoft for cloud computing.

Microsoft argues its cloud licensing agreements are needed to protect its intellectual property rights in Windows Server and that regulators should not force the company to give the server IP away for free.

"When a streaming service, like Netflix or Disney, includes a movie in their service, they pay for that right," Alaily said in her blog post. "They don’t get a credit or discount if a subscriber happens to own a DVD of the same movie. Software and the cloud are no different."

The escalating rhetoric from both companies is a sign of how much is at stake in the cloud computing market as both Google and Microsoft push for more gains.

Google CEO Sundar Pichai highlighted the growth of the cloud unit in an earnings call for Google’s parent company Alphabet on Tuesday, noting that the company's AI portfolio is attracting new customers and leading to larger deals.

Cloud revenue came in at $11.4 billion, up 35% from the same period last year, surpassing expectations.